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October 29, 2013

Fearful U.S. Investors Hold Half of Assets in Cash: BlackRock

Global investors still risk averse despite record stock market highs

Most investors around the world are not comfortable taking on more risk to achieve better returns despite recent gains that have pushed some stock markets to all-time highs, according to a new survey.

BlackRock’s first Global Investor Pulse Survey found that even less risk-averse affluent people with more than $250,000 in investable assets and greater confidence about their financial futures, along with investors of all types around the world, tended hold a lot of cash, with no immediate plans to change their investment mix.

In the U.S., investors of all types held 48% of investable assets in cash, with 18% in stocks and 7% in bonds.

Equity ownership rates were highest in Hong Kong and Taiwan, countries that also have high overall rates of household savings.

The BlackRock poll, executed by Cicero Group, a research outfit, interviewed 17,567 respondents in the U.S., Canada, the U.K., Germany, France, Italy, the Netherlands, Belgium, Switzerland, Australia, Hong Kong and Taiwan between Aug. 24 and Sept. 16. The U.S. sample comprised 4,000 respondents.

Researchers imposed no income or asset qualifications in selecting poll participants in order to make the survey a representative sampling of each country's entire population.

The survey found that nearly half of U.S. investors were positive overall about their financial futures, while the other half expressed worries ranging from “concerned” to “nervous,” “pessimistic” and “depressed.”

Notably, 58% of people who worked with a financial advisor — whether affluent or not — reported feeling positive about their financial future.

Affluent investors were more upbeat, with 72% describing themselves as positive, 78% saying they felt in control of their financial futures and 81% expressing confidence in the way they were making savings and investment decisions.

Debt and bill payments appeared to contribute to average Americans’ concerns and to affect the way they saved and invested. The poll found the percentage of take-home pay devoted to bills and debt was particularly high in the U.S. (49%) compared with the global average (40%).

These costs translate into widespread personal savings deficits in the U.S. When asked what would encourage them to invest more of their cash savings, about a third said “less personal debt.”

The lingering fallout of the credit crisis and associated economic downturn is evident in the survey results. In the U.S., “health care costs" followed by “job security” and “state of the U.S. economy” topped the list as respondents’ No. 1 concerns.

Global respondents mentioned “having to spend more than I earn” most often as among their top three concerns.

However, 43% of U.S. respondents said a modest earnings increase of $200 per month would encourage them to save more generally, 40% reported they would pay off more debt and 26% said they would save more for retirement specifically.

Around the world and in the U.S., respondents said they had recently spent more time planning a vacation (35%/27%), the purchase of a new technology item such as a smartphone (25%/25%) and researching a car purchase (23%/26%) than they had devoted to reviewing their retirement plan (17%/20%).

Retirees responding to the survey would have none of this. When asked with the benefit of hindsight whether they would have done anything differently, retirees responded as follows:

I would have started investing for retirement earlier (36%)

I would have spent less money (32%)

I would not have changed anything (23%)

I would have worked for longer (21%)

I would have sought professional financial advice (12%).

U.S. respondents most often said the retirement goal they expected to achieve was continuing to do some paid work, while global respondents ranked frequent holidays and travel as their top retirement goal.